How much Insulation makes sense?
This has been, during my lifetime, Totally Wrong! What’s wrong is
the assumption that the Return on Investment should be calculated
on current prices ignoring future inflation (not to mention possible
“black Swan” economic events). A home, besides being a place to live
is also a form of protection, psychological, physical and economic.
Here is an economic example: During the period from approx. 1972
through 2002 (30 years) my wife and I built and lived in 3 houses
(what were called “super insulated houses” back then). They were
designed and built to look like any typical house in the subdivisions
where they were located (not some architectural masterpiece). We
definitely went “overkill” on the insulation (double walls 16″thick).
All in climate zone 6 – rocky mountains, elevation over 7000 feet.
Those of you old enough to remember will recall the really nasty
inflation that occurred in that period. The other homes (same size
and looks) around us had heating bills between $1600 and $2000
per year – we had heating bills between $85 and $105 for 26 years.
I was a DIY builder and total cost for materials for all that extra
insulation was only about $2000 for the largest and most expensive
of the three houses. How much do you think the savings came to
over 26 years if all that money were placed in the bank when inflation
was that high?
NOW HERE IS THE REAL QUESTION! Does it make sense to really
overdo it on insulation (say come up to “passive house standards) or
is it more sensible to design based on current costs? Is there any possibility
that any of the various governments on Earth will do something really
stupid and cause another period of massive inflation during your lifetime?
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Replies
I suppose it depends on a couple of things, starting with the definition of "overkill".
Setting aside the COST of heating fuel or the electricity used to heat, one might simply consider the amount of fuel/elec that will be used over the course of the year.
Suppose your baseline is to insulate your walls to R-30 and your roof to R-60. How much less fuel/elec would you need if you upgraded insulation to R-50 and R-100?
Would you use 10% less fuel/elec? 50% less?
Then you compare the cost of the insulation upgrade (factoring in the time value of money) and compare that to your reasonably conservative estimate of inflation in fuel/elec cost.
That will give you an interesting result.
Then you also ask yourself, what if I did something else with that upgrade? For example if you're already planning a PV array, would it buy you a few more panels? That might be a better use of the money than an insulation upgrade.
Another thing to keep in mind is that a bit more effort in air sealing may be of more real value than more insulation, and at lower cost.
1 Btu per square foot per heating degree day should be your goal. Quite achievable and this will put you Net Zero ready, this should be the target of all new housing.
Doug
Gstan,
These calculations can be made easily, and your personal guess at future inflation and future energy prices are fairly easy to include in your calculations. I'm not sure whether most GBA readers are wrong, as you claim. More information can be found in this GBA article:
"Payback Calculations for Energy-Efficiency Improvements"
I find this whole discussion a bit silly to argue about, but if you are to apply inflation adjustments, you must also apply the same adjustment to the cost of the extra insulation since the time of the installation. $2000 spent 20 years ago is a lot more today. So to summarize, ignoring inflation entirely is a more correct assumption than applying an inflation adjustment to only one side of the equation.
etecberg:
I invite you to run a compound savings rate calculator on this type of data.
There are many available on the web - simple to use - no cost for use.
For example assume an initial extra cost of $2000 for insulation and no further
additions of funds - placed in an account at 12% per year (which is actually low
for what it was in the 80's and 90's). Then run the same calculations assuming
say $1600 initially plus an additional $1600 per year (the heat bill savings per year).
Use a total time interval of 26 years or so (your total time living in the house) at the
same interest rate - you will find that the total savings from the heat bills minus the
interest lost from the initial cost of the insulation will probably exceed the entire
construction cost of the house!
Least you think this an exaggeration, consider that I was able to find CD's (in the period
mentioned above) paying between 12% and 22% at the major banks. Tell me this can never happen again?
Over insulating is placing a bet on rising energy costs and there are much easier and more accessible ways to place the same bet.
If a DIY builder took $2,000 in 1972 and, instead of using it for extra insulation, invested in an S&P 500 index fund, that investment would be worth $361,123 in 2023.
MARTIN:
That's 51 years - I only mentioned 26!
Isn't this kind of speculation fun?
Gstan,
I thought you said that you built your first house in 1972.
But if you want the calculation for 26 years, here it is:
If a DIY builder took $2,000 in 1997 and, instead of using it for extra insulation, invested in an S&P 500 index fund, that investment would be worth $18,976 in 2023.
The modern model codes have pushed the code min requirement up to the economic break even point over the life of the building assuming fuel cost stay on the same 60-year trend.
My wild guess is if you are heating much of a house in zone 6 for less than $100 a year there was a second fuel source being used you failed to mention like a wood stove.
According to the chart on this web site the price of natural gas adjusted for inflation is almost unchanged since 1979.
https://www.in2013dollars.com/Utility-(piped)-gas-service/price-inflation
Walta
Walta:
Nope! But we were pretty far south where it's a lot easier to
design overhang distance to keep the sun out in the summer
and let it in in the winter. We also had interior insulated shutters
on every window. But I do agree that current codes probably
make most houses today far more efficient than they used to be.
In those days all the houses around me had (at best) 2x4 walls
with fiber glass batts (sloppily installed I might add). I don't
have hard data for the cost of heat in the average house there
but I was part of the engineering staff for the county in those
years and had the opportunity and the inclination to discuss
costs, energy usage and similar things with large numbers of
people at that time.
My guess is that in most climates we are at the point where if you build a Pretty Good House, the plug loads are going to dominate the amount you spend on energy.
Malcolm:
Yep! But, how big a percentage of the new houses being built
are even up to "Pretty Good House Standards"? And, what
happens if we have another "Black Swan" economic event?
I suspect you are looking at things from the viewpoint of a Builder
and I'm thinking of them from the viewpoint acquired during
a really long period of high inflation.
What kind of black swan event can you imagine were extra insulation helps more than any other strategy?
paul_wiedefeld: Black Swan events are by definition unpredictable but
I mean one which causes interest rates and prices to escalate wildly
like they did in the 70's through the 90's. Would extra insulation be
more effective than any other strategy that can be imagined, no but
would it be effective in its own right, yes - very likely.
How exactly does insulation protect you from higher interests rates? Surely a period of higher energy prices would be mitigated by insulation, but so much easier to do it other ways. If one thinks oil prices will spike sometime in the future, why not just buy some Exxon stock? That’s easier to sell than the equivalent amount of insulation.
gstan,
Do not be talked out of building well, the country is full of poorly built housing. Heat assistance programs can't keep up with the demand to heat these homes. Some fiddle as the planet burns, be a player.
Doug
I think it makes sense to improve efficiency down to around a 5% ROI. That's a little less than the stock market returns on average, but it's much more secure--on par with investments like treasury notes but you get the benefit of a comfortable home. I find that Pretty Good House-recommended insulation levels fall in that range, but it depends on a few variables.
I find that going to Passive House levels of insulation results in more like 2% ROI, which is still better than your money would do in a savings account, with other benefits such as resilience and comfort. But I find it harder to recommend a 2% ROI to my clients than 5%.
Last I looked the passive house did not care where on earth you happened to be and my gut said that it was impossible to recover your costs in zones 1-5 making the ROI negative.
Walta
Neither of those statements are correct, Walta. There is always an ROI to increased insulation levels; after modeling many Passive Houses and near-Passive Houses, I find that it's often somewhere around a 2% simple ROI (no compounding, inflation or rate changes) here in CZ6. The energy use per square foot requirements don't change with Passivhaus but the insulation needed to reach those energy targets varies significantly.
Well ROIs can be negative, so yes there is always an ROI :).
A quick scenario:
1. Existing R-60 attic upgrade to R-90
2. Assumption only insulation materials cost changes. Everything else stays the exact same, with no markup.
3. Use https://www.lowes.com/pd/US-Greenfiber-SANCTUARY-by-Greenfiber-R-60-Blown-In-Insulation-Sound-Barrier/5001939515, which overs 25.9 sqft at R-30 (no framing factor since this is on top of R-60) for $16.47, or $.64/sqft.
4. Assume 5000HDD/year
5. Assume $.13/kwh electricity, COP = 3 for heat pump. $/MMBtu = $12.70 for heat.
6. Assume 2% cost of capital.
7. Assume 30 years investment period.
Savings: 5000*(1/60-1/90)*24 = 667 btu/sqft/year.
Discounted to today: 14931 btus or .01 MMBtu.
Levelized Cost: $.64 per sqft / .01 MMBtu saved = $42.59/MMBtu, or 3.35x the current cost of heat.
Pretty terrible investment! If you rearrange it as ROI, the ROI = -5%.
How do we improve the math?
1. Stretch the duration out
2. Lower the cost of capital (could leverage with a loan)
3. Decrease the R value (going from R-60 to R-71 is a -3% ROI)
4. Use higher cost of energy
5. Use colder location
6. Use less efficient heat pump or electric resistance.
There is no one size fits all answer and your R56 walls would be overkill and a poor choice for anyone lining in zone 1.
It sounds like you had the money to spend and made choices that pleased you. Your neighbors likely had different goals and made choices that pleased them.
Walta
Walta: Like everybody else, when we began we had little knowledge
and a tiny budget. Mistakes were made but too much insulation
wasn't one of them. The politics, common building practices and economics
of the times made it possible to use what might be called "insulation overkill"
today, to amass wealth. In those years interest rates went up and down
like a yoyo which resulted gyrating material costs and energy prices. Knowing
that we wouldn't have trouble paying to keep the house warm was comforting.
All I'm getting at is that going a bit over the top on insulating is a form of
personal protection and should looked at as an insurance policy. Will most
of us ever really benefit from insurance? Most do eventually. Health insurance
is expensive and health insurance companies make money on it - extra
insulation insurance is cheap and the only one who benefits from it is
the homeowner. It will be quite difficult to convince me that we
have finally achieved long term economic stability and that we
will never again see huge commodity and energy price increases.
If we're going to speculated on futures, or talk about black swan events. An interesting part of this is the upside. What happens when personal energy becomes abundant? For instance when PV's and chemo-batteries become really good, or when we have nano-nuclear power plants for each home.
Does that bring the argument that as high of insulation isn't as necessary?
I'm just being an ass, I'm normally all about insulation. We should bring back asbestos insulation it was cheap and good.
Jamie
Jamie,
I seem to remember Martin wrote about that some years ago. It isn't out of the realm of possibilities. You could argue that technologies like air source heat pumps have already done that. Simplifying a bit, when you switch from electric resistance to a heat pump with a COP of say 2.5, you could use half the insulation you did and still come out ahead.
Arguably, for natural gas users (including those who use heat pumps powered at least in part by gas) that day has already come - the price of gas is so much lower than it was 20 years ago. If you had prepped for high gas prices in the early 2000s, you wasted a lot of money.
jberks:
AS long as we're speculating---
I suspect your comment on asbestos may be a little bit
tongue in cheek.
There's never a month goes by that we don't see an article
about a breakthrough in fusion research. I suspect that the
day fusion power goes on line will be the day that insulation,
solar panels, wind generators, and a really large number of
other products (not to mention industries) become irrelevant.
How far away is it? 30 years? next month?
And Malcolm is right - heat pump technology is already
reducing the amount of insulation that makes sense at least
in climate zones lower than 6 or 7.